Making Blended Finance Work for Water and Sanitation

Unlocking Commercial Finance for SDG 6

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Investments in water and sanitation are a prerequisite to deliver on the Sustainable Development Goals (SDGs), in particular on SDG 6 ensuring availability and sustainable management of water and sanitation for all. Blended finance can play an important role in strategically investing development finance to mobilise additional commercial finance needed to fill the current investment gaps. Thus far, however, blended finance has not reached scale in the water and sanitation sector. A greater evidence base is needed to better understand the current applications as well as the potential of blended models in the water and sanitation sector. This publication takes a commercial investment perspective and provides insights into three subsectors: (1) water and sanitation utilities, (2) small-scale off-grid sanitation and (3) multi-purpose water infrastructure and landscape-based approaches. The publication draws out recommendations for policy makers and practitioners to apply and scale innovative blended finance approaches where most appropriate.


Primer on blended finance

In order to respond to the global development challenges, the 2015 Addis Ababa Action Agenda (AAAA) put emphasis on the need to work closer with and increase investments of the private sector. Blended finance offers a promising approach to crowd-in additional commercial finance that is not currently invested for development outcomes, whereby blended finance is defined as the strategic use of development finance for the mobilisation of additional finance towards sustainable development in developing countries (OECD, 2018[1]). Development finance can thereby be concessional finance or non-concessional finance coming from public or private sources, e.g. philanthropic actors. Additional finance focuses on commercial finance, which refers to finance invested at commercial rates from private sources or public investors such as sovereign wealth funds.


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